Understanding of the term return on investment will provide a better picture as to how to enhance the returns on the existing portfolios. Return on investment is nothing but the rate of earnings on an investment you made over a period of time. This is a financial term which is used in business.
The basic objective of any business is to earn profit and maximize wealth. Over the years wealth maximization is given more importance than earning profit because of various factors one of them is sustainability with growth. Making more money is everyone’s goal. A potential investor is influenced by a lot of factors in the very decision making. Here you will find some tips to improve your returns and also some warnings to refrain from making costly mistakes.
Always go for the equity rather than investment in bonds would be the first advice any one would give. This is because, on observing the trend over a period of time, it can be seen that the equity investments have always given out huge earnings. In a market that is very volatile, earning comes to those who take risks. The bonds have a fixed income return which has been underperforming in the last decade. A portfolio which is diversified in risk aspect would be a wise thing to hold on and make money. Hence the combination of the equity and bond when held would optimize the risk of the portfolio and balance out the return in a brilliant way.
Now that the decision to invest in a diversified portfolio has been made, the next question that pops up is that which company to choose. Whether to invest in the equity of a small company or in a large corporate is indeed a confusing one. Here are the facts. Smaller companies have always been performing seemingly well and better than the larger companies. The risk of investing in smaller companies is high. It is because the risk involved in funding small companies is higher than that of larger companies and also due to inventory is less, a shorter track record. Larger companies and mid-sized companies have a reputation and a good track record for earnings which is less risky than small companies. Hence a portfolio having investment in small to medium to larger companies in a diversified manner will always earn huge returns.
When investment is being made you need to also consider the expenses in relation to it. Cost of the investment has a direct impact on your returns as the difference between the consideration that you pay to invest and the net value of investment is the return that you earn on any investment. Managing such costs and related expenses need to be made.
The very objective of wealth maximization has the bottom line of choosing between the value of the investment and the end of the day or the growth that the investment promises. Choosing the right investments and holding them for the right duration would enhance the returns in a wise manner.